Study "Economics / Finance / Banking" Essays 771-825

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Balance of Payment Constraint on Growth Essay

… Balance of Payment Constraint on Growth

The Balance of Payments Constraint on Growth

Growth rates vary among different countries. If a company has more money going out than coming in, it is unbalanced. The balance of payment plays a large part in the economic rate of growth of a country. There are several different theories on how countries can boost their economy, but sometimes this is easier said than done. If it were easy, all countries would experience growth at a steady pace. However, some countries may be at an economic disadvantage. But there are things that disadvantaged countries can do to improve the balance of payments. The situation is ideal when current account balance shows a deficit and the capital and financial account shows a surplus in the same amount. This results in zero balance of payments.

The rate of growth can suffer if demand is high because it forces supply to adjust, which it cannot always do. Domestic output can lead to a deficit in the balance of payments. Also, if imports grow faster than imports, the country will need to borrow money to avoid a deficit. When less advanced companies are involved with more advanced companies, they should expect significant growth rates. Thirlwall states that in order for growth to take place, a healthy balance of payments is necessary. He says that if a country can increase demand up to their current supply with no balance of payment troubles that the growth rate is sure to rise (1979).

We have to wonder how struggling countries begin to experience growth if their economy is already struggling. There are several suggestions on what countries should do in order to attain economic growth. Thirlwall sums it up to the fact if a country is having difficulties experiencing growth, then whatever it is they are producing is not in high demand (1979). This answer may not be scientific and does not require many different formulas to determine ways to increase growth. In the case of some countries, they can only work with what their country is supplying them naturally. So, the rate of growth may continue to falter leading them to depend on other countries for some type of financial investment.

Baja-Rubio and Diaz-Roldan state that increasing outputs by increasing imports can lead to the balance of payments being unbalanced. This could lead in a decrease in the exchange rate which makes it even more difficult to trade. When this happens, any further output must discontinue until this issue can be corrected (2009). Countries experiencing a slow growth rate should know that there are ways to get out of this situation and that it is not impossible. There are countries that experienced a slow growth rate for years and managed to overcome their situation by applying smart business strategies to improve their countries' situation. Ireland is a country that…… [read more]


Morgan Stanley and Goldman Sachs Research Paper

… Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence. (Smith,… [read more]


Personal Statement: Master's in Taxation Essay

… At present, I am currently employed in the field of finance. My current line of work spurred an interest in the importance of tax policy and its impact upon the bottom lines of corporations. Obtaining my master's would add to my skill set, and open up opportunities to explore and enter a profession where the need for new talent is growing rather than contracting in the globally-focused economy. My particular areas of present interest include international taxation; corporate taxation; and the benefits of reallocating assets and redesigning corporate structures for different entities (such as C-corporations vs. S-corporations or nonprofits vs. for-profits). While pursuing my degree, I hope to gain greater, in-depth functional skills and knowledge in every area possible, given I may not know where my career path may lead.

Taxation has long been an area of fascination for me, both in terms of how it impacts individuals and organizations. Contrary to the stereotype, taxation is never boring, given its potential impact upon the profitability of a company and how the tax code affects the utilization of organizational resources. The complexity of taxation is testimony to its worthiness for a lifetime of study. The multifaceted nature of taxation, combined with the new developments the profession is facing now and will face in the future is why graduate study is demanded of all with serious aspirations in the field.… [read more]


Venture Capital Essay

… ¶ … Capital

Opening Summary

It is recommended that Columbia undertakes the first option, by bringing in outside capital in the form of a $250 million fund. The principles will need to continue to focus on domestic telecom, and ensure that they retain as much control over the company as possible. The view that they would need to cut investment banking in order to facilitate this is overstated -- management can be hired to handle that side of the business while the principles continue to focus on direct investment with their newfound funds.

Key Issues

The key decision facing Columbia is whether to continue primarily as a venture capital firm making investments financed by the principles or whether they should bring in outside investors, marking a shift to becoming something closer to an investment bank. Accepting limiteds would change the way that the company functioned in several important ways. The first is that there may be restrictions on the investments, as the limiteds would want some control over the investments, possibly adding a layer of constraints to the investments made by the principles. Related to this might be limitations on creating companies from scratch. This is something that Columbia has done successfully, but is outside of the normal role of the venture capitalist. There is fear that if limiteds are taken on, this type of activity would become more difficult to approve. This flows into hands-on investing, something in which Columbia also specializes. The company has been successful in part because the expertise of the different principles has allowed it to pay greater attention to individual deals. The principles feel that this adds value.

Given these disadvantages, bringing in limiteds might seem entirely unwarranted, but there are advantages to doing so. There were some deals that were simply too big for the company, which was constrained by the wealth of the four principles. When it was unable to handle certain deals, Columbia would miss out on valuable opportunities to improve its bottom line. In the wireless industry, upfront capital requirements can be extensive, so capital constraints are likely to be an increasing problem in the future. The need for greater capital requirements had resulted in the company taking on additional leverage, which of course increased the risk of the firm.

Next Steps

There are a couple of different options available to Columbia. The first…… [read more]


Macroeconomics Rethinking Debt Essay

… Macroeconomics

The government's policies that increased the debt in the 2008 were in general the right policies to make. There can be some debate about the nature of those policies -- whether it is wise to contradict market signals by bailing out the banking industry, for example -- but evidence-based policy is clear that deficits should be undertaken during times of economic distress in order to minimize that distress. The problem is not the debt taken out since 2008 during the recession, the problem is the debt taken out prior to that. Deficits should not occur during economic boom times. During those times, surpluses are required in order to help government prepare for the proverbial rainy day. "When the private sector is humming along…that's when government needs to tighten its belt."

Deficit spending during a recession is not so much good for growth and it helps to mitigate the downside risk of recession. Bernstein argues that government spending should be conducted in order to offset weakness in private sector spending. Thus, deficit spending is not necessarily expansionary, but it should be used to avoid economic contraction. Increased government demand offsets a reduction of private sector and family spending demand. In the past recession, we saw both as overleveraged homeowners were forced to stop consuming. Private business saw this reduction in demand and responded by restraining investment. If government does not spend at that point, then aggregate demand falls, plunging the economy into a negative feedback loop. Government spending simply avoids such feedback loops. Again, the issue here is that deficit spending during economic boom times is exactly the wrong policy, especially when it is spent on things that are unproductive (like billionaires' tax cuts, pointless wars and more benefits for the richest generation in history). "Borrowing to invest in productive infrastructure" is better than "borrowing…… [read more]


Finance Ameritrade Essay

… Finance

Ameritrade is about to make a substantial investment in new equipment and needs to estimate its cost of capital. The company has strong historic returns on investment of 40%, but uses a discount rate of 15%. One analyst has used a discount rate of 12%. Some managers think only the cost of debt is relevant, so they will need to have it explained to them why they are wrong. The company needs to make a determination about the cost of capital.

Therefore, the company's financial managers must make some assumptions. It is believed/recommended that Ameritrade will use a discounted cash flow analysis, with a net present value calculation, in order to make a determination about the financial merits of the project. Thus, the company needs to determine its cost of capital, and make estimates of the future cash flows.

There are a number of factors that Ameritrade management needs to consider when evaluating the proposed advertising program and technology updates. The first thing, as the case notes, is the strategic implications. Basically, if the deal makes any sense at all financial, Ameritrade is going to have to do it. Strategically, the company needs the new technology to maintain a competitive advantage over its closest competitors in the discount trading segment. In addition, Internet technology is rapidly evolving, so failure to make investments is technology will put the company at a disadvantage, especially if this failure allows competitors to execute trades faster or provide a better trading platform. The stock market is improving at the time of the case, and volumes are growing -- it is important that Ameritrade takes advantage of this opportunity.

Of course, the company also needs to take a number of financial factors into account. For the NPV calculation, the expected future cash flows are critical, as is the discount rate. The latter should reflect the opportunity cost of capital -- what the company might earn on other activities. The project should have a net present value, meaning that it will add value to the company. A project that does not add value to the company…… [read more]


Protectionism and Free Trade Principles Research Paper

… Finally, there will be a description of several case studies that illustrate success or failure of these policies: These case studies provide a chance to determine order to see whether trade liberalization, protectionism, or a combination of the two is… [read more]


International Relation APEC Dissertation

… Validity/Reliability

The validity and reliability of the paper are identified by the references and in-text citation given. It helps in identifying that the data or information that is collected is purely based on authentic sources.

Chapter Four: Data Analysis

The criterion for membership in APEC is that a country should be a separate economy rather than a State that's why the members of APEC are called as Member Economies rather than member countries. Many countries like India, Pakistan Colombia has applied for APEC membership, but they are not allowing these countries for various purposes.

APEC has three pillars i) Trade and investment liberalization ii) Business facilitation iii) Economic and technical cooperation.

The first pillar works to minimize the trade barriers, when APEC was established there were 16.9% barrier and till 2004 they were reduced to 5.5%. The second pillar works to facilitate business, the cost of business transaction was reduced to 6% till 2006 and third pillar works on free trade. APEC business advisory council is promoting the theory of free trade in Asia Pacific Region (Pue 2009).

To study the performances of the trading blocs, the analysis is done based on the information gathered from various sources. The existing position of multilateral and proposed trading blocs is studied according to their GDP, population and the PPP. The data mentioned is about the year 1994 (See Figure 1).

The share of world trade based on the regional trade agreement is defined in the appendix (See figure 2). It explains the overall share of each trading bloc in the trading practices all over the world.

Chapter Five: Conclusion

The idea of APEC was to promote the economic benefits to all the member countries. It is not easier for APEC countries to sustain its growth and better performance because the challenges and competition among other trading blocs is high. This is forcing the regional activities and the countries to perform well. The member economies of APEC are also experiencing backlash against globalization from weak regions. However, to improve the growth and to stimulate the economic condition of the members of APEC, it is essential to join hands together and to follow one trading policy for all the regions. It is also important for every member to give equal importance to the practices and policies of the member country.

Regionalism and multilateralism directs the trading activities and reduces the burden of barriers. Moreover, there is compatibility between regionalism and multilateralism, whereas APEC and EU are not comparable to each other.

Trading policies are different in every region, but the purpose of every trading bloc is to ensure the proper import and export activities without any illegal influence. This helps in protecting the legal, social, economic and political system of the country.

Bibliography

Beeson, Mark. And Jayasuriya, Kanishka. "The Political Rationalities of Regionalism: APEC and the EU in Comparative Perspective." 1998.

Bergsten, C. Fred. "Open Regionalism." The World Economy 20, no.5 (August 1997), 545-565.

Frankel, A. Jeffery, Stein Ernesto, and Wei Stang-Jin. "Regional Trading… [read more]


International Monetary Fund (IMF) Essay

… Importantly, the IMF does not lend money for specific projects.

The final area of involvement is technical assistance. In this function the IMF supports member nations by supporting them in managing their economic policy and other financial affairs.

One example of an IMF project is its efforts to assist African nations in their effort to strengthen their defenses against money laundering, smuggling and participation in international terrorism that has resulted from the illegal diamond trade. The IMF's involvement in this project included lending money and offering workshops to nations affected by this activity in an effort to curtail it.

2. The Grameen system of banking, based on the loaning of uncollateralized monies to the poor, would be as effective in the United States as in any other nation. The "get to know your customer" kind of approach is as badly needed in the U.S. As anywhere else as there is large segment of American society that have no access to credit and Grameen provided this opportunity. The Grameen system has worked effectively in other areas of the world and is an example of why the IMF should consider becoming involved. The grass roots approach used by Grameen is more stabilizing than the broad based approach used by the IMF.

3. Studies have indicated that as women become educated and more involved in the business world they correspondingly produce fewer children. Such developments serve to assist the world in its fight against population growth while at the same time provide the framework for economic stability. A report on this phenomenon can be found in a story appearing in the Bloomberg Business Week on April 8, 2009. The story reference several examples of how improved economic conditions have resulted in decreased population growth

Warhurst, Alyson. 'Girl Effect' Could Lift the Global Economy. Bloomberg Businessweek. Retrieved on March 24, 2012, http://www.businessweek.com/globalbiz/content/apr2009/gb2009048_644459.htm.… [read more]


Use of Derivatives in a Chosen Company Term Paper

… International Finance

The Use of Derivatives by Southwest Airlines

Southwest Airlines is one of the most successful airlines in the U.S.; remaining profitable in many years when other airlines suffered losses, including the aftermath of 9/11. The low cost airline… [read more]


Finance While Highly Inflated Countries Essay

… Finance

While highly inflated countries might have weak home currencies, this is absolutely not the case in the United States. The Bureau of Labor Statistics (2012) makes this very clear- core CPI is around 2.2%, when the Fed's target rate for inflation is between 1.7% and 2% (Spicer, 2012). That is by no intelligent person's definition "highly inflated." Because high rates of inflation are usually detrimental to economies (Investopedia, 2012), central banks tend to raise interest rates in response to higher inflation rates, as this can control inflation. When interest rates increase, the value of currencies will tend to decrease. Countries with higher inflation rates tend to see their currencies decrease in relation to the rates of trading partners with lower inflation (Van Bergen, 2012).

The inflation rate in the U.S. is 2.2%. The core CPI in Canada is 1.6% (Statistics Canada, 2012). This would indicate that the Canadian dollar should appreciate against the U.S. dollar, because that country has a lower inflation rate. As expected, the Canadian dollar appreciated against the greenback since January (graph courtesy of Oanda):

3. Normally, it would be expected that the nation with the one year interest rates that are higher would see its currency depreciated against any country with one year interest rates that are lower. The United States has seen its rates kept very low, near the zero bound, for the past several years. In contrast, Brazil's rates were ranging between 10 and 15% a year ago. This would indicate that the real should appreciate against the dollar over the past year. If we look at the exchange rates over the past year, we can see this has occurred.

According to Oanda, one year ago the real traded at 1.65 and today it trades at 1.75. This…… [read more]


Hedging Provides to Non-Financial Firms Term Paper

… For trading portfolios, capital is required to be held against market risk exposures.

Liquidity

Medium-to-High

The ability of an exchange company and a bank to fund its deposits and asset allocation strategies is a critical consideration.

Operational

Medium-to-Low

This is an emerging area of discussion. Most recent debacles are tied to significant operational shortcomings. As such, there is a debate whether and how capital should be charged for operational risk. The assessment of operational risk is still evolving.

Legal

Medium-to-Low

There are, of course, some jurisdictions where legal risk is quite high; however, legal risk is often adequately controlled.

Reputational

Low

Reputational risk can cause significant problems and may be considered an "event" risk. Loss of reputation can cause institution failure; however, the occurrence of such massive reputational failure is often preceded by a catastrophic event, such as large publicized trading losses.

FINDINGS:

How hedging is done

The process of hedging involves a hedger who tries to fix the prices at some level aiming to ensure certainty in the revenue of sale or in the cost of production. It also involves active participation by the speculators who take positions on the basis of the movement in the prices and then they bet upon those prices. There are some arbitrageurs who make use of the inefficiencies of the prices and make high profits through the transactions. The spot prices and the futures remains correlated to each other.

ADVANTAGES AND DISADVANTAGES:

The following are the advantages and disadvantages of hedging to non-financial firms that have come out of the research that was conducted:

PROS

CONS

Non-financial firms can use futures options which can help them in minimizing the risks.

The costs of hedging can have an impact on the profits of the non-financial firms.

Hedging can help in making huge profits without taking many risks.

Risks and Profits are inversely related i.e. reducing risk will mean reducing profits.

Hedging helps in tough market and trade conditions.

The non-financial firms can't trade in the day period which makes it hard for them to follow the hedging strategy as it is hedging is ideal for the short-term traders.

Hedging gives protections against price changes of commodities, inflation, interest rate changes and exchange rate changes.

If the market performance is stable then hedging will offer very little benefits.

The portfolio can help avoid the daily market volatility.

Often hedging requires large capital

It provides an opportunity to carry out complex trading which can help in earning maximum returns.

Hedging requires good trading skills and experience which makes the hedging strategy difficult to follow for the non-financial firms.

REFERENCES

Jorion, Philippe (2009). Financial Risk Manager Handbook (5 Ed.). John Wiley and Sons. p. 287.

"A survey of financial centers: Capitals of capital." The Economist.

Baily Nicholas, David Browne and Eve Hicks (2003), "UK Corporate use of Derivates," The European Journal of Finance, pg. 169-193

Ali Fatemi & Carl Luft (2002), "Corporate Risk Management Costs and Benefits," Global Finance Journal, pg. 29-38

Crockford, Neil (1986). An Introduction… [read more]


Efficient Market Hypothesis Essay

… ¶ … Efficient Market Hypothesis

One of the most common challenges for investors is being able to consistently outperform the stock market averages. A controversial strategy that has been continually debated over the years is the Efficient Markets Hypothesis (EMH).… [read more]


Taxation Advice for a Multinational Research Paper

… This will lead not only to growth in the manufacturer's traditional product areas, but also a movement into new, higher-end licensed fashion product lines. Along the way, it is the role of the multinational tax account to guide the company… [read more]


Crisis the Causes of the Economic Essay

… ¶ … Crisis

The Causes of the Economic Crisis

The complex interactions and relationships that make up the global economy make it very difficult to describe the causes of any large-scale economic event in a manner that is at once accurate and succinct. The recent economic crisis is no exception to this rule; the global recession was caused by a confluence of forces and specific aspects of the relationships that exist between various economic entities and nations. At the same time, there is one element that can be cited as a substantial cause of weakening and even eliminating certain major financial institutions, shaking up the financial industry as a whole, and thus triggering other events that contributed to the recession. This one element can be summed up in a phrase that is no doubt familiar to anyone that has paid even the slightest attention to the news in the past few years, yet its role in the financial crisis is still not entirely understood by many and seems clouded in mystery. In reality, subprime mortgages and the problems they led to are relatively easy to understand, though it's difficult to comprehend how these problems were allowed.

A prime loan such as a mortgage is one that is given to someone that is very credit worthy -- i.e. there is low risk of default and a high likelihood that the loan will be repaid and investments recouped with interest. Subprime simply means "below prime" or "less than prime," so a subprime mortgage is quite simply a home loan made to a risky borrower. Private lenders like Countrywide and semi-public entities such as Fannie Mae and Freddie Mac made many of these subprime loans in the decade…… [read more]


Empirical Evidence for the Ricardian Model of Trade Essay

… Ricardian theory of comparative advantage states that relative labor productivity determines trade advantage. In other words that the international difference in comparative advantage is due to relative labor productivity, and mostly technological differences between nations with some nations able to… [read more]


D Economic Diversification in Las Vegas Research Paper

… Las Vegas Economic Diversification

The economy of Las Vegas is under crisis and the future growth is completely in the dark. The concerned officials are putting in efforts to device mechanism for economic recovery. One of the proposed methods is… [read more]


Globalization Trends Research Paper

… Globalization Trends

Globalization means a manner in which there is a connection and spread of products, technologies and communication to all parts of the world. Sometimes, economically it may refer to the global distribution of goods and services especially when… [read more]


Financial Officers Nonprofits Essay

… The Chartered Institute of Public Finance & Accountability explains this as:

CFOs everywhere have a responsibility to ensure that their organisations control and manage money well, and that strategic planning and decision making are supported by sound analysis. In the public service context, CFOs must also meet the demands of openness and accountability in decision making, balance competition for limited resources across a range of worthwhile objectives, deliver value for money and safeguard taxpayers' money (CIPFA, 2012:3).

How this function is implemented is dependent upon the organization. It may be necessary for the Financial Officer to oversee a special committee of board members or department leaders who have control over money and use fiscal policies. Usually the Financial Officers ensures the purchasing or other procurement activities have clear methods and rules to that they can be followed. Audit steps (from daily monitoring to the preparation of the year-end final reports) are dependent upon a review of these records and of the activities that make them work. These types of records are very important whenever organizations have public fundraising projects. In reality, of course, whether small or large, these same tasks get done to some extent with the help of the Financial Officer or Treasurer. In either case, the upshot is that all of the money that is brought in (from checks, credit charges, etc.) must be recognized and assigned to the appropriate budget categories as it goes out. Many public benefit organizations use fund accounting methods that restrict revenues to very specific purposes. It is the Financial Officer who ensures that this process supports good business decisions.

REFERENCES

CIPFA (2009). The role of the chief financial officer: In public service organizations. The Chartered Institute of Public Finance & Accountability. Viewable at www.cipfa.org.uk/panels/finance_director/download/role_cfo.pdf.

Writing, A. (2012). What are the duties of officers of an organization? Chron.com. Viewable at http://smallbusiness.chron.com/duties-officers-organization-535.html.… [read more]


Psychology of Consumer Behaviour Essay

… 1). Conditions in Mexico make it possible for one to understand more concerning the relationship between subjective well-being and money-making motives, considering that the economic environment in the country is more diverse in comparison to First-World countries.

Although people normally… [read more]


GM V Honda in FY Essay

… 6. While Honda's balance sheet has not undergone dramatic change recently, GM's has. Post-bailout, the company had a current ratio of 0.58 and had negative equity. For GM, the past few years have been about using the bailout -- and getting out of the pension obligations -- to rebuild the company's financial strength. It appears they are doing that, although at present GM does not have the same strength that Honda has.

GM today has a gross margin of 12.1%, its best level is several years. The net margin is 4.55%. By comparison, Honda has a gross margin of 27.3%, and has not seen this metric drop below 25% even when the firm saw reduced revenues during the global economic slowdown. The net margin for Honda is 5.9%, again higher than that of GM. The gross margin figure being distinctly superior for Honda seems to indicate that the company has a combination of better pricing and more efficient production, but GM has rolled its pension payments into its "cost of sales," distorting that number and bringing it to a level that is much worse than that of Honda.

Ultimately, the main difference between the financial performance at GM and the financial performance at Honda comes down to GM's pension problems -- the unfunded liability and the effects of the bailout on those obligations. The cash flow statement does little to separate out the pension obligations from GM's normal operating costs, so it is difficult to ascertain whether Honda is also outperforming with respect to its pricing or operating cost control. Both firms are at present improving their revenues and other metrics, in large part because of the (albeit slow) economic recovery. While Honda is still fighting to get back to pre-recession performance, it is unknown how well GM can perform, since there is little historical context for a General Motors without massive pension liabilities.

References:

MSN Moneycentral: General Motors (2012). Retrieved February 6, 2012 from http://investing.money.msn.com/investments/stock-price?Symbol=GM

MSN Moneycentral: Honda…… [read more]


Rampell, C.R. and Saltmarsh, M Essay

… The policy -- on the one hand -- decrees that older workers must stay in their jobs longer, while the practice -- on the other hand-results in age discrimination that places unemployed older workers in the middle of steadily closing vice grip. When people can be required to work later in their life, revenues will increase to help fund the Social Security program and benefits will be reduced for those years before maximum retirement age is reached. But when baby boomers retire, as postulated in 2005, a labor shortage would encourage people to continue working well into their retirement -- and this is underscored by the resistance of business to hire older workers (Wyss, 2005). But the labor shortage is not a reality of the 2008-2010 fiscal crisis -- the ramifications of which continue into 2012 and ostensibly beyond. The reality is that "…American companies aren't hiring -- business losses, tight credit, consumer retrenchment -- add the fact that many of their older workers are unable, or afraid, to retire" (Rampell & Saltmarsh, 2009).

Transfer programs. Increased immigration can be viewed as a long-term support to the Social Security funding problem since most immigrants enter the U.S. As young adults, which could help to increase the ratio of workers to retirees above the 2 to 1 that is anticipated. The notion that increased immigration results in increased government spending in education is based on the provision of education prior to the plethora of online and e-learning college courses.

Although Americans resist increases in the Social Security tax, this is likely to be part of the solution portfolio. The payroll tax can be raised one or two percent and the contribution cap can be raised to $140,000, up from $90,000 (Wyss, 2005)...

Social Security has come about as Americans have sought prosperity and supported the development of industrialization -- and then capitalism -- in the U.S. Many sacrifices have been made by workers in order to support these efforts. It is imperative that, as Teddy Roosevelt said in 1912, "We must protect the crushable elements at the base of our present industrial structure...it is abnormal for any industry to throw back upon the community the human wreckage due to its wear and tear" ("Social Security History," 2011).

References

History of Social Security. (2011). Retrieved http://www.ssa.gov/history/briefhistory3.html

Rampell, C.R. And Saltmarsh, M. (2009, September 2).

Wyss, D. (2005, March 31). Social Security -- The economic issues, Bloomberg…… [read more]


Market Structures in Detail Research Paper

… Monopolies on the other hand lie at the other end of the continuum, so that they become price setters. This they can do by either adjusting quantity or price itself. The strategy that the firms follow under this regime are… [read more]


Coffee Prices and Government Regulation Essay

… Coffee

The market for coffee is not perfectly competitive, but it is very close. The conditions of perfect competition are that there are many sellers and buyers, the products are similar in nature, and that there are few barriers to entry for new producers, and that prices are determined by supply and demand (Investopedia, 2011). While there are many buyers and sellers, the buyers are often significantly larger than the sellers, so there is some bargaining power in the market. The products are roughly similar in nature although there are some differences in the two main coffee types (arabica and robusta) and between the product of specific farmers, as evidenced by the emergence of single origin or organic coffees. Additionally, coffee has a limited geography of production, placing a constraint on the degree to which coffee production can be increased in response to demand. This is a barrier to entry -- England cannot enter the coffee market, for example. The market, however, is controlled by supply and demand.

Thus, the conditions for perfect competition are not met in the coffee market. The most important consideration that affects the market is the barriers to entry and exit. Only a limited number of nations can produce coffee, and this barrier to entry creates a ceiling on coffee production. Similarly, there is a floor on coffee production to some extent. The land on which coffee grows -- on tropical mountainsides -- is not necessarily good land for growing other commodities. Farmers who grow coffee, therefore, cannot exit the market without sacrificing their ability to earn a living. Thus, one or two seasons of difficult economic conditions may not be enough for the supply in the market to adjust to new market conditions.

Starbucks' argument that higher prices paid to growers will increase the glut is accurate. The coffee market is in a state of constant surplus, which means that some producers need to exit the market. If Starbucks pays higher prices to farmers, that will only encourage more farmers to enter the market. As a result, the glut will become worse.

The coffee growers are currently operating at a position of economic loss. There is too much production, and the high exit barriers in the coffee industry imply that this condition could hold for an extended period of time. They are producing beans for 80 cents per pound and selling them for 50 cents per pound. Some producers would need to exit the market, or demand would need to increase, in order for the coffee growers to operate at a position of zero economic profit.

Part II. The article I…… [read more]


Alternative Approach to Taxes on Trade and Business Income Research Paper

… Accounting/Finance

Alternative Approach to Taxes on Trade and Business Income

Analyze how foreign persons in the U.S. are taxed on trade and business income and suggest an alternative to the current system.

persons are subject to tax on an international… [read more]


Return on Financial Assets Term Paper

… The gross return in this case was 4% (400/10,000) and the inflation rate was 5%. Thus, the real return was -1%:

.04 - .05 = -0.1%

4. The current yield of the stock is $2 / $53 = 3.77% There are no expectations of capital gains on the current yield, so historical performance is irrelevant. It is assumed in this model that the dividend next year will be the same as it was the previous year, and this expected dividend is the basis of the calculation, until the company announces what its dividend for the next year will be.

The capital gains yield on the stock was ($53-$50)/$50 = 6%

The return on the stock over the course of this year was $5 ($3 capital gain + $2 dividend). The original purchase price was $50, so $5 / $50 = 10% is the total return on the stock over the course of the past year.

5. The formula for CAPM is as follows:

source: Investopedia

In this situation, the risk-free rate has been identified as being 2%. The market risk rate is 12%, so the risk-free rate needs to be subtracted from this to derive the market risk premium. The betas for each company are given. All other factors being equal (and they are), the lower the beta the lower the expected rate of return on the stock.

For the three securities, we have CAPM calculations as follows:

Ra = 2 + (.3)(12-2) = 5%

Ra = 2 + (.7)(12-2) = 9%

Ra = 2 + (1.6)(12-2) = 18%

As predicted, the firm with the highest rate of risk (the third company, with the beta of 1.6) has the highest expected rate of return according to CAPM. In this way, CAPM clearly illustrates the link between risk and return in the market, particularly with respect to investor expectations of these two concepts.

Works Cited:

Investopedia. (2011). Advanced bond concepts: bond pricing. Investopedia. Retrieved January 28, 2012 from http://www.investopedia.com/university/advancedbond/advancedbond2.asp#axzz1kmQexa4w

Investopedia. (2011). Capital asset pricing model. Investopedia. Retrieved January 28, 2012 from http://www.investopedia.com/terms/c/capm.asp#axzz1kmQexa4w

Estrella, A. & Mishkin, F.…… [read more]


China and Globalization Three Research Essay

… All of these activities come under the classification of bribery for purposes of lubrication. Extortion is the demand for bribes from government officials as a cost of establishing or continuing a business, and both of these are illegal under U.S.… [read more]


Great Depression Angela Thomas Term Paper

… These included the Emergency Banking Relief Act, the Banking Act, the Agriculture Adjustment Act (AAA), the Federal Emergency Relief Act (FERA), the National Industrial Recovery Act (NIRA), as well as initiating the Civilian Conservation Corp (CCC). Then just two years after the start of these programs, the Roosevelt administration embarked on a second round of legislation called the Second New Deal. Out of this came the Social Security Act, the National Labor Relations Act, the Wealth Tax Act, and the Works Progress Administration (WPA).

In order to stabilize the banking industry, one of the very first pieces of legislation signed into law by Roosevelt was the Emergency Banking Relief Act. This legislation gave the President the authority to set credit policies, control currencies and gold movements and exchanges, and decide which banks were allowed to remain in business and which were to be closed. (Hillstrom 2009) Following this came the Banking Act of 1933, legislation which created the Federal Deposit Insurance Corporation, (FDIC) as well as giving the government power to regulate the investment practices of financial institutions. (Hillstrom 2009)

Roosevelt next attempted to deal with the agricultural disaster by introducing the Agriculture Adjustment Act, which created the Agriculture Adjustment Administration (AAA). The President had come to the conclusion that the American agricultural system was over producing and instituted a program of limiting production in an attempt to raise prices. (Coleman 2010) Roosevelt was a follower of the theory that an overly competitive, market driven economy, leading to overproduction and imbalances in the system, had been the cause of the depression. His solution was maintaining a balance of prices and wages through government control of production. (Himmelberg 2001)

In addition to the programs mentioned, Roosevelt's New Deal also saw the creation of the Tennessee Valley Authority (TVA) and the National Recovery Administration (NRA). The TVA was responsible for the industrial development of the Tennessee Valley and it embarked upon a vast hydro-electric project of dams to bring electricity to isolated, and undeveloped areas. The NRA was one of Roosevelt's most widespread and controversial programs. It set voluntary standards for wages and working conditions while rewarding those business who complied with exemptions from certain federal laws and allowing them to "display a Blue Eagle symbol on storefronts and products, which would show American consumers that the companies were patriotic participants in the NRA program." (Hillstrom 2009)

It is difficult to determine the exact effect of FDR's New Deal on ending the Great Depression as the onset of World War II had a significant impact on the American economic situation, but what can be determined is the effect that these programs had on American history. Social Security is one of the most successful programs ever created by the federal government and millions of senior citizens depend upon it for their very livelihoods. Innocent depositors no longer lose their life savings if their bank fails because of the FDIC program, and many rural parts of America have the New Deal to thank for… [read more]


Tax Caps/Schools Tax Revolts Research Paper

… It specifically called for an initiative petition in 1980 that went into effect in 1982. The proposition drive was spearheaded by the anti-tax group Citizens for Limited Taxation. The initiative name refers to the 2.5% annual limit on municipal taxes.… [read more]


International Economics Law International Trade Term Paper

… However, if you approach the problem from the perspectives of the indigenous people in that country then you might reach a different conclusion altogether. Although there may be significant economic benefits for certain sectors of the economy, the benefits are sometimes limited to certain segments of the populations. There does not seem to be any clear cut answer to overcome some of the challenges that are present in the WTO's role or the role of the individual nations. However, it should also be noted that even though the poverty issues are not directly confronted through trade liberalization, one might speculate that such activities would undoubtedly put a nation in a better position to address such issues.

Works Cited

Bussolo, M. & Lecomte, H., 2009. Trade Liberalization and Poverty. Overseas Development Institute, 6(1), pp. 1-4.

Edwards, S., 1993. Openness, Trade Liberalization, and Growth in Developing Countries. Journal of Economic Literature, 31(1), pp. 1358-1393.

Goldberg, P., Khandelwal, A., Pavcnik, N. & Topalova, P., 2009. Trade Liberalization and New Imported Inputs. American Economic Review, 99(2), pp. 494-500.

The Economist, 2012. The world in their hands. [Online]

Available at: http://www.economist.com/node/21542930

[Accessed 23 January 2012].

The World Trade Organanization, 2012. Who we are. [Online]

Available at: http://www.wto.org/english/thewto_e/whatis_e/who_we_are_e.htm

[Accessed 23 January…… [read more]


Protectionism and Free Trade Principles Research Paper

… Though the IMF exists for a reason, and even despite the fact that it does help countries survive through very tough times, the organization must recognize that trade liberalization is not always the answer, and must therefore tailor its programs… [read more]


Including Using Diagrams What Macroeconomic Issues Determine the National Savings Rate Essay

… Macroeconomic Issues That Determine the National Savings Rate

National savings and the economy

The National Savings rate is the estimate from the U.S. Commerce Department's Bureau of Economic Analysis (BEA) of the amount of money left over from personal, business,… [read more]


International Business Country a -- United States Essay

… International Business

Country a -- United States

Country B - United Arab Emirates

Industry -- Telecommunications Equipment

The United Arab Emirates (UAE) is a federation of seven emirates situated on the Arabian Gulf and bordered by Saudi Arabia and Oman.… [read more]


Instruments and Markets Essay

… ¶ … bonds that corporations can issue to borrow capital. These instruments take various forms depending on who holds the certificate, how the debt is collateralized if at all, the amount and method of paying interest if the debt does… [read more]


Cra Country Risk Evaluation Essay

… "Sovereign risk concerns whether a government will be unwilling or unable to meet its loan obligations, or is likely to renege on loans it guarantees" (Country risk model, 2011, The Economist). Sovereign risk is calculated by measuring the nation's historic willingness to pay and not renege on its debts.

Perhaps the most difficult measure of risk to accurately assess is political risk. "Political risk concerns risk of a change in political institutions stemming from a change in government control, social fabric, or other noneconomic factor" (Country risk model, 2011, The Economist). Dealing with a nation which has a recent history of revolt and suppression of the populace like Iran would likely make it rate high as a political risk. "Economic risk often overlaps with political risk in some measurement systems since both deal with policy" (Meldrum 2000:1).

In additional to these factors, a final important question to ask is whether there is a culture of entrepreneurship within the nation, to support the company's business model. McDonald's generally operates by opening heavily-regulated franchises abroad. Are there native Iranians who could manage the restaurants? And is there a consumer base ready, able, and willing to purchase the product. Is the nation consumption-driven? (Country risk model, 2011, The Economist).

Credit ratings agencies such as Moody's as well as the World Bank and the International Monetary Fund are important sources of information on a nation's overall economic stability. As well as banking sector ratings, however, the extent to which the government is involved in the banking sector in a positive or negative fashion (either policing corruption or micromanaging its affairs) and corruption in the banking sector (which caused the credit meltdown in 2008) should also be considered. And ultimately, the long-term outlook for a nation should be of greater concern to a corporation like McDonald's which wishes to 'put down roots' abroad, so no single rating should be a deciding factor when assessing the possibility of entering the nation and doing business.

References

Country risk model. (2011). The Economist. Retrieved:

http://graphics.eiu.com/files/ad_pdfs/2005CountryRiskModel.pdf

Meldrum, Duncan H. (2000). Country risk and foreign direct investment. Business Economics.

Retrieved: http://findarticles.com/p/articles/mi_m1094/is_1_35/ai_59964458/?tag=content;col1… [read more]


Economics Macroeconomics Many Companies Produce for Foreign Term Paper

… Economics

Macroeconomics

Many companies produce for foreign markets as well as for markets in their home country. Exports are the goods and services that are sold in foreign markets. Imports are goods or services that are bought from foreign producers. In spite of the benefits of international trade, a lot of nations put limits on trade for a variety of reasons (Trade Restrictions and Their Effects, n.d.). The main types of trade restrictions are tariffs, quotas and embargoes.

A tariff is a tax put on goods that are imported from abroad. The effect of a tariff is to increase the price of the imported product. It helps domestic producers of comparable products to sell them at higher prices. The money received from the tariff is collected by the domestic government. A quota is a limit on the quantity of goods that can be imported from a foreign country. Placing a quota on a good generates a shortage, which causes the price of the good to increase and permits domestic producers to increase their prices and to increase their production. A quota on a product, for example, might limit foreign-made products to 10,000,000 units a year. If Americans buy 200,000,000 units of this product each year, this would leave most of the market to American producers. An embargo stops exports or imports of a product or group of products to or from another country. Sometimes all trade with a country is stopped, usually for political reasons (Hall, 2011).

All of these programs limit world trade, which means there is a decrease in the total number of goods and services that are produced. They shift production from more effective exporting producers to less effective domestic producers. When production is decreased there are fewer workers earning wages. Trade restrictions also raise prices, which is frequently their main purpose. Trade limits in one country, in addition, usually lead to limits being placed in other countries. If the United States places a high tariff on cars made in Japan, for instance, Japan may then put tariffs on American goods sold in Japan. In spite of these disadvantages, countries are tempted to use trade restrictions in order to protect their…… [read more]


Multiplier Thailand, Like Many Third Essay

… 229). Cotler surveys the empirical impact of fiscal government policy and its effectiveness as a multiplier. Cotler does that while defending the new Keynesian Theory and its assertion that the "value of the government consumption multiplier" decrease[s] in relation to increases in inflation (Cotler 2000, p. 240).

The conclusions from Cotler's empirical studies apply to the Thai Government's monetary and fiscal policy. We can apply Cotler's characterization of the concept of the multiplier effect and its relationship to domestic spending by urging the Thai Government to manage inflation if it hopes its fiscal policy to have a significant impact. This advice is critical for the Thai Central Bank because they are currently scrambling to manage inflation (Bhanupong 2010, p. 130). In other words, a thorough understanding of the concept of the multiplier effect on the part of the Thai Government, would in this case, lead to changes in the priority of the Government. There ought to be an aggressive management of inflation by the Thai Central Bank, while the government's fiscal policy focuses on increased capital investments. Though this won't be enough it will be a start. The decrease in consumer confidence and the tentative reservations of the investment community can only be alleviated by government policies which address the perceived political instability of the Thai Government's ruling party (Bhanupong 2010, p. 133-135).

Conclusion

In disregard of the principle to engage in capital investments, in the last fiscal year for which such numbers are available, the Thai Government has decreased the proportion of the total budget which is allocated to capital investments to just 12.5% (Bhanupong 2010, p. 130). The Thai Government's concentration in domestic spending which will have little effect on long-term growth coupled with the Thai central bank's struggles in reducing inflation pose significant problems for the recover of the Thai economy. A thorough understanding of the multiplier effect would alleviate the disconnect between the fiscal and monetary policies practiced by the Thai government.

Bibliography

Bhanupong, N 2010, "Effectiveness of Thailand's macroeconomic policy response to the global financial crisis," ASEAN Economic Bulletin, vol. 27, no. 1, pp. 121-135, viewed 12 Dec 2011, Http://www.Ebsceohost.com

Brawley, M & Baerg, N. 2007, "Structural adjustment, development, and democracy," International Studies Review, vol. 9, no. 1, pp. 601-615, viewed 13 Dec 2011, Http://www.ebsceohost.com /

Chaikledkaew, U Lertpitakpong, C. Teerawattananon, Y. Thavorncharoensap, M. & Tangcharoensathien, V. 2009, "The current capacity and future development of economic evaluation for policy decision-making: A survey among researchers and decision makers in Thailand," Value in Health, vol. 12, no. 3, pp. S31-S35, viewed 12 Dec 2011, Http://www.jstor.org/

Chipman, J 1949 "The generalized bi-system multiplier," The Canadian Journal of Economics and Political Science, vol. 15, no. 2, pp. 176-189, viewed 12 Dec 2011, Http://www.jstor.org/

Claes-Henric, S. 1977, "The interaction between multiplier and inflation processes," The Scandinavian Journal of Economics," vol. 79. no.2, pp. 239-259, viewed 12 Dec 2011, Http://www.jstor.org/

Cotler, P 2000, "Government policy multiplier, inflation and fiscal intermediation: Testing the new keynesian theory" The Study of Economics. Vol. 15,… [read more]


Fall 2007, the United States Essay

… These well- off individuals have already profited greatly from their investments while, because of the bailout, never really having absorbed any risk. This procedure violates the very essence of the investment process. Excessive returns are justified under the normal scenario… [read more]


Japan and Korea Research Paper

… ¶ … economies of Japan and South Korea. This is accomplished by analyzing the underlying strengths and weakness for each country. Once this takes place, is when we will draw conclusions about what steps can be taken to deal with… [read more]


Fargo Diversity Within and Outside Research Paper

… Likewise credit is distributed intentionally across population and industry classes in the attempt to diversify risk. Since past credit delinquency is a major indicator underlying both FICO and Wells' eligibility criteria (Annual Report 136), if FICO ratings lower than 600… [read more]


Japan and Korea Term Paper

… Economic History -- Japan & Korea

Questions about the Economic History of Japan & Korea

Explain how the Meiji restoration led to Japan's early industrialization.

The Meiji Restoration is a critical period in the history of Japan in several ways… [read more]


Milton Friedman: Journey From Past Term Paper

… Analysts are of the view that the reasons behind this situation are the continuous debt problems in Europe and a thought that the United States economy will weak further in the future. Some also point out that there will be… [read more]


Barry Eichengreen ) Has Speculated Term Paper

… A stronger euro could return to its trajectory as a challenger to the dollar, but only after those involved in international trade feel secure that the stability issues plaguing the euro during this crisis period are behind the currency.

Another… [read more]


Current Economic Conditions Term Paper

… Economics

In the last quarter, consumer spending increased 2.4% and both retail and vehicle sales increased in September as well. This contradicts the data on consumer confidence that shows Americans are worried about a number of economic issues. This discrepancy is explained a couple of ways. One is that the issues that affect consumer confidence are more of a long-range nature. The long-term budget outlook does not affect may be concerned but it does not affect spending. Similarly, problems with the euro may be a concern but are distant for the average American. The other explanation is that the upper quintile of the population accounts for half of all consumer spending. Therefore, as long as this group is confident enough to spend, consumer spending can rise while confidence wanes. A survey of consumer confidence would therefore need to include the wealth proportionally in order to accurately reflect consumer spending levels.

According to the model of aggregate demand, an increase in consumer spending should increase both aggregate expenditures and aggregate demand in the economy. Such an increase could even spur business investment increase supply or productivity. The real GDP would theoretically rise with an increase in consumer spending, all other factors held equal. More likely is that increased demand would spur higher levels of business investment and give the government more tax revenue that it would no doubt spend as well.

For the government to spur an increase in consumer spending and consumer confidence, a couple of types of fiscal policy can have an impact. Reducing taxes among those with tight budgets would spur spending, since a lack of confidence and tight budgets combine to create pent-up spending demand. Lower taxes would free up cash among such individuals, allowing them to spend more. Taxes on the wealthy will not have…… [read more]


Macroeconomics Research Paper

… There is more money in this world than there are resources, the consequence of a fiat money system and the multiplier effect. As a result, while the price may increase on certain goods, if those goods are necessary for survival… [read more]


International Monetary Econ the Price Term Paper

… This situation has led to a crisis that threatens the existence of the euro and is knocking it down in value. The Indian rupee is expected to gain against the dollar, as is the Russian ruble. Strong growth in India compared with the U.S. should bring about that situation, and the ruble's status as a petrocurrency should also help it to rise against the dollar as the Big Mac Index predicts. The Swiss franc is considered to be overvalued in the index, and Swiss exposure to the euro probably will help it drop. The Japanese yen is an interesting case because it is basically at par on the Big Mac Index. No major moves are predicted. With yen and U.S. treasuries both trading at basically zero, the lack of movement is indeed possible.

5. The U.S. should achieve domestic stability. As the exchange value of the U.S. dollar is related to interest rates, this puts the question of exchange rate stability squarely in the purview of the Federal Reserve. The Fed is also charged with maintaining inflation and unemployment rate stability. Thus, the Fed's duty is to seek out domestic economic stability in general, a set of policies that probably will create a weak dollar. This is in keeping with the responsibilities of that body.

A weak dollar will help U.S. exporters and harm U.S. importers, something that will bring more balance to the balance of payments. Internal stabilization will reduce the transfer of wealth overseas, and that should serve to reduce unemployment domestically. As a result, the U.S. should pursue policies that will establish domestic stability and a weak dollar over external stability, given the economic…… [read more]


Money Game by Charles Green Book Report

… 60).

Hedge 50 -- 50. The key theme in this section is the need to diversify investments to ensure that the eggs are in more than one basket.

The Rules Matter. Just like the law, Green suggests that the more… [read more]


Eurozone Crisis Term Paper

… Indeed such action is not even politically palatable, especially not in Germany. Germany's preferred action at present is to petition the European Commission to "impose fiscal discipline on excessively indebted states in the single currency area" (Wintour, 2011).

Criticism of… [read more]


Caledonia Products Term Paper

… It has a positive NPV, a very high IRR, and has a short payback period (early in year 2). In general, any project that has a positive NPV is one that delivers value to the shareholders, improving shareholder wealth. Thus, any project with the positive NPV should be undertaken if the company can do so. In this case, there are no known barriers to accepting this project.

k) Risk can be measured in a number of ways. The most basic measure of risk is found in the discount rate. This rate reflects a combination of the firm's risk (cost of capital) and the project's risk, which can be built into the discount rate as well. This risk is associated with the likelihood that the future cash flows will decline in value. The second way to evaluate the risk of a project is through a sensitivity analysis. This form of analysis subjects the calculation to changes in key variables, to determine what the impact of a change in those variables is. For example, this calculation changes more with a 1% change in the discount rate than it does with a 1% change in the tax rate. This indicates that the project is more sensitive to the discount rate than the tax rate. Normally, all key variables will be subject to sensitivity analysis, including cost and revenue projections. A third way of evaluating risk in a capital budgeting project is through the payback period. The longer the payback period, the higher the project's risk, because with time more different factors can influence the project. This is the same principle as sensitivity analysis and discount rate -- as circumstances can change over time the project's risk is seen to increase, therefore a project that pays back the initial investment quickly is a less risky project.

l) According to CAPM, the measure of a project's risk that is relevant is the firm's cost of capital. The cost of capital is related to the firm's risk relative to the market, so this is the most important measure, if applied to an NPV calculation as the discount rate. The most important implication for this in capital budgeting is that the project should share the firm's risk characteristics if the NPV calculation is going to use the firm's cost of capital as its discount rate. For projects that are significantly different in risk characteristic to the firm's existing risk, the discount rate is a poor measure of the project's risk. Indeed, even if the firm's risk characteristics have changed such that the beta (measure of risk vs. The broad market) is no longer applicable then the discount rate under that circumstance would also be unreliable.

m) A simulation approach highlights changes in the different variables. The simulation can be designed so that changes in one variable can impact on other variables as well. Much of the value in the simulation is in the process of building it, wherein the firm would gain a strong understanding of the… [read more]


Economy of the BRIC Countries Case Study

… Economy of the BRIC countries

The term BRIC is an acronym used to describe economies of Brazil, Russia, India, and China. These countries are described as emerging markets because of their developments and reforms in their economic transitions from closed… [read more]


Keynesian Theory Neoclassical Economists Essay

… Of course, in the current Congress, conservative supporters of minimal government and laissez faire theories are in a position to block all such stimulus measures.

Neoclassical theorists would argue that once wages have fallen sufficiently in this recession and employers are unable to force more gains in productivity, they will have no choice except to hire new workers, although they may choose to do so in low-wage countries like China. There has been little sign that massive new hiring is taking place in the United States or other Western economies, even though the layoffs of hundreds of thousands per month that were common in 2008-09 have not yet been repeated. In fact, productivity gains and declines in real wages have been consistently higher than these economists expected, while unemployment has remained higher than they predicted. As Joel Naroff, chief economist at Naroff Economic Advisors, put it: "Survival meant cutting costs as rapidly as possible and fulfilling orders with the fewest number of workers" (Crutsinger and Manning 2009). They are using even more overtime and temporary workers rather than new full-time employees to lower costs, which has also been a persistent trend in the American economy over the last thirty years. Most of them also have little confidence in a rapid economic recovery or a rise in consumer demand, which makes them reluctant to hire new employees and bring back those who have been laid off. Even in 2009, though, economists believed that companies were "starting to reach the limits of how much they can produce with their shrunken workforces" (Crutsinger and Manning 2009). This has not really occurred, however, and the removal of stimulus measures and the election of laissez faire, deficit-cutting conservatives to Congress -- who also seem determined to depress the economy for political reasons -- kept consumer demand relatively flat, along with hiring.

WORKS CITED

Clarke, P. Keynes: The Rise, Fall and Return of the 20th Century's Most Influential Economist. Bloomsbury Press, 2009.

Crutsinger, Martin and Stephen Manning. "Productivity Gains May Be Bad News for Job Seekers." AP Business Writers, Nov 5, 2009.

Krugman, Paul. "We're Still in a Paradox of Thrift World" New York Times blog post August 26, 2010, 9:38 AM

Mankiw, N.G. Principles of Economics. South-Western College Publishers, 2010.

Minsky, H.P. John Maynard Keynes: Hyman…… [read more]


Construction Industry in Iran Problems and Possible Solutions Literature Review

… Construction Industry in Iran: Problems and Possible Solutions

The construction industry in Iran has been plagued by problems. The literature that has been created on this issue addresses the issues that Iran is facing in its construction industry, and discusses… [read more]


Market Efficient Respect Set Information Essay

… (Pagano, M. And A. Roell 1996)

The effect size

Perhaps the most studied is anomaly consisting of effect size, according to which companies whose market capitalization is low produce returns higher than those indicated by the CAPM. Arrow (1959) was… [read more]


Luxury Car Industry Term Paper

… Luxury Car Industry

The luxury car market has changed dramatically in the past ten years. There are a couple of different reasons for this change. The first is the specter of sustained higher fuel prices, something that has kept some fringe buyers out of the luxury market. The second is a series of economic slowdowns in the West, coupled with economic booms in many emerging markets. This has reduced consumption of luxury cars in Europe and North America, resulting in steep declines during the worst of the economic slowdown (Reuters, 2009). Sales were expected to fall in 2009 to below 1996 levels, less than one million units total (Business Week, 2009). BMW responded to this by introducing new cars to its lineup in an attempt to reinvigorate sales (Ibid). This effort ultimately failed, and sales of BMWs dropped 19.5% in the first half of 2009 despite the new vehicles (Fairclough, 2009).

This downturn in traditional markets has only partially been offset by increases in emerging markets. Some, such as China and India, show strong growth potential and look to be the future of luxury car sales. In China, luxury car sales increased 7% in the first half of 2009. For Mercedes, China is the number one market for its S-Class (Ibid). Mercedes, BMW and other luxury car brands have opened joint ventures in China to produce for this emerging demand (Ibid).

India is also a market with strong potential. Although luxury cars are priced at a premium in India due to high tariffs, sales are growing in that country (no author, 2011). Buyers are not price sensitive, unlike Western buyers faced with sluggish economies. The vehicles are selling rapidly because they are an important status symbol, which again differs from Western markets where a Mercedes or BMW is a nice status symbol, but not a critical ego boost. As a result, the luxury car market is shifting its attention to the world's largest emerging markets to capture these consumers, even at a time when the core markets are struggling with rapidly declining sales.

The article by Eric Yep entitled "Suzlon to Sell Non-Critical Assets" reflects a corporate finance decision. The company, an Indian energy firm, is seeking to generate funds in order to make changes to its balance sheet. The firm has debts maturing next year that it needs money to retire. The article does not get into detail…… [read more]


Ford v. Honda Ford's SWOT Research Paper

… S. market is uncertain and the Japanese market is weak. The company needs to diversify its production as well, given how much damage the earthquake/tsunami did to its supply chain. Despite reduced sales and stagnant equity growth, Honda is in a better position than many of its suppliers, something that will help it to recover, if it puts money into improving the product lineup and entering new markets. There is even room for luxury vehicle growth in the emerging markets, something that could finance new product development. These strategies should be measured again with market share, revenue and profit, but also with increased supplier diversity counts, market growth and new product introductions.

Ford and Honda are perhaps more similar on key issues that people realize. Though the management structure is different, their relationships with their governments is largely the same. Ford has more financial issues, but is more flexible and has a greater sense of strategic purpose having been on the edge of bankruptcy. Both companies face challenging home markets, and are therefore faced with growth overseas, but both are looking forward to U.S. recovery in the next few years.

With strong distribution networks, both companies are set for growth in established markets, but need to keep their product lineups in tune with market demand, which includes the need for alternative fuels in response to rising gas prices.

Works Cited:

Forbes. (2011). Ford hits $14 with China growth, fuel efficiency focus. Forbes. Retrieved April 15, 2012 from http://www.forbes.com/sites/greatspeculations/2011/11/29/ford-hits-14-with-china-growth-fuel-efficiency-focus/

Forbes. (2011). Honda recovery rolling slowly with weak global growth. Forbes. Retrieved April 15, 2012 from http://www.forbes.com/sites/greatspeculations/2011/08/22/honda-recovery-rolling-slowly-with-weak-global-growth/

LeBeau, P. (2011). Ford quality tumbles in JD Power survey. CNBC. Retrieved April 15, 2012 from http://www.cnbc.com/id/43511239/Ford_Quality_Tumbles_in_J_D_Power_Survey

Muller, J. (2012). Key leaders in Ford turnaround to retire; Mulally not going anywhere. Forbes. Retrieved April 15, 2012 from http://www.forbes.com/sites/joannmuller/2012/02/09/key-leaders-in-ford-turnaround-to-retire-mulally-not-going-anywhere/

Yan, F. & Durfee, D. (2012). Honda eyes new models, strong growth in China. Reuters. Retrieved April 15, 2012 from http://www.reuters.com/article/2012/04/10/us-honda-china-idUSBRE8390EU20120410… [read more]

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